The economy is hit by the Covid-19 pandemic and affects the short-runaggregate supply. Critically discuss the short-run and long-run effects on outputand the price level using the AD-AS diagram:(a) The central bank responded by printing more money. (b) Suppose that the economy is in the long-run equilibrium after the policyresponse in part (a). The central bank would like to return the economy to thepre-Covid-19 long-run equilibrium; explain how the central bank could achievethis goal.

The aim of this question is to show the short run and long run effect on output and price level…

The economy is hit by the Covid-19 pandemic and affects the short-run aggregate supply. Critically discuss the short-run and long-run effects on output and the price level using the AD-AS diagram: (a) The central bank responded by printing more money.

The economy is hit by the Covid-19 pandemic and affects the short-run aggregate supply. Critically discuss the short-run and long-run effects on output and the price level using the AD-AS diagram: (a) The central bank responded by printing more money.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

The economy is hit by the Covid-19 pandemic and affects the short-run
aggregate supply. Critically discuss the short-run and long-run effects on output
and the price level using the AD-AS diagram:
(a) The central bank responded by printing more money.

(b) Suppose that the economy is in the long-run equilibrium after the policy
response in part (a). The central bank would like to return the economy to the
pre-Covid-19 long-run equilibrium; explain how the central bank could achieve
this goal.

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